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Swap Execution Facility Alleges in Lawsuit That Banks Conspired to Prevent Its Success

The TeraExchange, a swaps execution facility registered with the Commodity Futures Trading Commission, and related entities, brought a lawsuit in a federal court in New York against multiple interest rate swap dealers and some of their affiliates; an interdealer broker of IRSs; and an electronic trading facility for IRSs (that also operates a SEF). Plaintiffs alleged that the defendants “conspired” to undermine TeraExchange and other IRS exchanges by, among other things, inhibiting customers of the IRS dealers’ affiliated futures commission merchants from clearing transactions executed on TeraExchange and the other IRS exchanges. They did this, said plaintiffs, because the dealers’ objected to TeraExchange’s all-to-all central limit order book execution platform that might bypass the dealers. As a result of the defendant’s actions, claimed Plaintiffs, they sustained substantial lost profits. Plaintiffs said that defendant’s actions are a violation of federal and New York State anti-trust laws, as well as of various common law prohibitions. Plaintiffs did not allege any violations by defendants of any law expressly governing SEFs or exchange-traded swaps, or any CFTC rule. Plaintiffs seek treble damages for defendants’ action and a permanent injunction against defendants’ continuing their allegedly “unlawful conduct.” Plaintiffs’ lawsuit is very similar to a lawsuit filed late in 2015 by the Public School Teachers’ Pension and Retirement Fund of Chicago. There plaintiff, in a purported class action lawsuit against 12 swap dealers and, in some cases, certain of their affiliates, alleged that the defendants also conspired to prevent IRSs from being traded on exchanges. (Click here for details on the purported class action lawsuit in the article, “Multiple Swap Dealers Sued for Allegedly Impeding Roll-Out of Centrally Executed Interest Rate Swaps; EU Shuts Downs Inquiry Regarding Credit Default Swaps” in the December 6, 2015 edition of Bridging the Week.)

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